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Thursday, April 14, 2011

Fairness and Ethics in Decision Making

Fairness and Ethics in Decision Making

“Many of our decisions are made within a social context, in which we are confronted with the options, the actions, and the presence of other active decision makers (Kelly 2000). Because of the social setting, decision makers are often have impact on the welfare of others, and vice versa” (Cremer D., Dijk E).

“Ethics is not following the law. A good system of law does incorporate many ethical standards, but law can deviate from what is ethical. Law can become ethically corrupt, as some totalitarian regimes have made it. Law can be a function of power alone and designed to serve the interests of narrow groups. Law may have a difficult time designing or enforcing standards in some important areas, and may be slow to address new problems” (Velasquez M., Michael J.D.)

Here is another very relevant example in fairness and ethics in decision making, “Say ‘A’ is the widowed parent of three children. He has been jobless for almost a year. Six months ago he started looking outside his field, dropping his expectations and salary requirements. He is deep in debt, has no medical coverage and is overdue on the rent. He has been trying to keep up a cheerful attitude for his children, who don’t know the extent of the family’s woes. Now a good job has come up. He is told it’s between him and another person, but he must swear in writing that he has never taken illegal drugs. Trouble is, he used to smoke a little marijuana now and then. He is never taken any other illegal drug and he don’t use marijuana anymore either — but that hasn’t changed his opinion that it is absurd and hypocritical that marijuana is illegal while alcohol and nicotine — which every year kill millions and cost society billions. Does he lie on the application?” (Hanson W.). people often lie whenever they fall in this kind of situation. It is unethical but there is no way out. Situation and the environment compel them to be unethical and unfair.

“Most of our decisions aren’t such dilemmas. But the stakes can be high even in mundane matters, for everything we do and say represents a choice. How we decide determines the shape of our lives”. (Wes Hanson)

Our decisions in our daily life and in our business situation are unethical most of the times. The reason is that ethical decision may not be the correct decision from the business standpoints and may not be perfect decision from individual perspectives. For example, now a day we, the consumers are very aware that we disregard or say ‘No’ to those business that employed child labor or pay less to their employees. On the other hand businesses have to reduce the cost of their production in order to survive in the competitive business world. They cannot survive if they don’t send their manufacturing plant to China and employed cheap labor of developing countries and least developed countries due to the lack of competitiveness in the business. For example, CEO of the business decides and says, “We are not going to employ those cheap labors rather being the American company, we only hire American citizens and pay good salary”. This decision is very fair and ethical but this may not be a good business decision. Because, they may go out of business due to the lack of competitiveness and eventually who ever are employed in the business will be laid off as almost all manufacturing giant is moving to developing world seeking cheap labor and cheap materials.

There is not any clear distinction between ethical and unethical business decisions. Some decisions are ethical for us but the same decisions are consider unethical by some other people. For example, CEO of the any company gets paid far more than that of the average employees of the company. Some people argue in favor of it and some people argue against it. A person who says this is fair believes that CEO’s contribution to the success of the overall organization is far more than that of the average employees and on the other hand those who argue against it say it is misuse of the power.

One of the reputed commercial bank of Nepal was practicing unfair and unethical business practices to hide taxations. After so many years one of their operation level employees in internal audit department found out the truth and threatened the management team to rectify it before he public the news. Top level management immediately called the meeting. Some of the board members were purposed to fire him because he was the employment at will, which means employer can fire their employees any time for no reason. But board decides to keep him and moved him to other location and in other department. Latter, the guy called the press conference and leaked the breaking news to the media and then to the general public. And finally, the bank gets closed.

In my opinion, above example is a fair and ethical because the management did not fire the guy even though they knew that he is against the fortune of the business. But it’s not the good decision either. Though the guy did the good job by whistle blowing but organization can save its public image by firing this guy and making some adjustment within the organization’s internal audit department.

Another example of fairness and ethics in the decision making is: we have an uncle (older brother of my father) who used to work in the cement company. After working 22 Years in the cement company, he was unable to work like before due to the exposure to the dust, smoke and other unhealthy work life hazards. Few years later he was fired without pension and nothing to live on. His supervisor said that he was a good employee before but now he is worthless. Is it a fair decision? Is it ethical? I would say it is neither fair nor ethical. My uncle is unable to work not because of his own reason rather it is due to his working environment. Therefore, the cement company is responsible to provide him all health related benefits and pension. Decision to fire him and his supervisors comment on him is clearly unethical, irresponsible and unfair.

Furthermore, we have hospital related family owned business. We own several hospitals and we are the sole suppliers of the medical equipment. Whatever medical equipment sold in Nepal like city scan, ultra sounds, ECG machine etc goes through our supply chain. We take a lot of benefits of being only one supplier in the country. Our profitability ratios in those equipments are exceptionally high. We do this because there are no competitors at all and threat of new entrance is almost nil due to our contract with the Japanese and Korean manufacturing company. We know that it is not ethical to charge too high price in health related goods but this is the way business operates. Our top level management team is doing their best to increase the profit margin either by selling more or by charging high price. During our family gathering my brother (President of the Global Meditech international and Medtronix Nepal) said that “we are not charging high price to our customers rather the price is determined by the demand of the medical equipment itself”). He is right. Price is always determined by the market forces of supply and demand. There is a huge demand of medical equipments in Nepal and we are the sole suppliers supplying those equipment. Two key factors are widely responsible for setting present high price of medical equipments. The first is that the Nepalese hospital industry is growing business and there are no other suppliers in the country therefore we enjoy a kind of monopoly power in the business. But still we cannot say that it is fair and ethical decision as said by my brothers. We have unethical business practices. We charge high price because we know that people will buy it any way which is unethical.

Truly speaking, it is very hard to be ethical and grow in the business in the context of Nepal. To be ethical in the business adds some cost to the overall cost of production. In my opinion, like land, labor, capital, and organization, ethics is another cost of the business. Doing business ethically means adding some cost to it which increase the bottom line cost of the business and we have to charge little bit more to the customers to cover the incremental cost due to the ethicality in the business.

In conclusion, “No one can simply read about ethics and become ethical, of course. People often have to make decisions under economic, professional and social pressure. Rationalization and laziness are constant temptations. But making ethical decisions is worth it if you want a better life and a better world. Keep in mind that whether for good or ill, change is always just a decision away (Hanson H.)